IN THE HIGH COURT OF SOUTH AFRICA (TRANSVAAL PROVINCIAL DIVISION) DATE: 16/5/2006 CASE NO: 20905/2003 and 16876/2005 In the matter between: TERSIA MATILDA ELS Applicant and AGRI KORPORASIE BEPERK 1st Respondent PIERRE DE VILLIERS BERRANGE N.O. 2nd Respondent MIRIAM OLIVERA ADRIANA VERMEULEN 3rd Respondent MEESTER VAN DIE HOOGGEREGSHOF (T.P.A.) 4th Respondent LAEVELD KORPORATIEWE BELEGGINGS BEPERK 5th Respondent ________________________________________________________________ JUDGEMENT ________________________________________________________________ MURPHY J 1. This judgement deals with two applications. The first concerns an application for the rescission of three orders under case number 20905/03 2 brought by Tersia Matilda Els (“the applicant”) against Afgri Koöperasie Bpk (“the first respondent”) who sought and obtained a final sequestration order against the applicant on 18 May 2004. The first respondent was previously known as Natalse Landbou Koöperasie Bpk. The second and third respondents are the trustees of the applicant’s insolvent estate. The fourth respondent is the Master of the High Court. Initially only the first respondent opposed the application for rescission. However, subsequently Laeveld Korporatiewe Beleggings Beperk (“the intervening creditor”) sought and obtained leave to intervene in the rescission application. In addition, the intervening creditor has brought a second application for sequestration of the applicant under case number 16876/2005, such application to be determined in the event of rescission being granted in respect of the orders granted in April and May 2004. For the sake of convenience, and to avoid confusion, I will refer to the key role players throughout as the applicant, the first respondent and the intervening creditor. 2. During June 2003 the first respondent launched an urgent application for the sequestration of the applicant and her husband to whom she was then married in community of property. The application was opposed by the applicant and her husband. The first respondent also sought an alternative order that the applicant’s husband, Conraad Els, be held personally liable 3 as sole member for the debts of D & F Chemicals CC in terms of section 64 of the Close Corporations Act 69 of 1984. 3. The application for sequestration was predicated upon a claim by the first respondent for an amount of approximately R9 million owing in respect of agricultural chemicals and fertilisers supplied to the joint estate or to D & F Chemicals CC. The applicant alleged an element of wrongful collusion on the part of Conraad Els, D & F Chemicals CC and one Hugo Steenkamp, an erstwhile employee of the first respondent, in relation to the pricing of the goods sold and delivered, in particular that the goods were sold below their market price to the substantial detriment of the first respondent. It was alleged that the applicant and her husband were personally liable for such debts, that such exceeded the value of their net assets and that accordingly the joint estate was in fact insolvent. The applicant and her husband opposed the sequestration application on various grounds, essentially denying liability for the debts of the close corporation or any collusion with Steenkamp in acquiring the goods at a price substantially below the market price. 4. When the matter was enrolled on 9 September 2003, Bertelsmann J referred it to trial allowing the notice of motion and the opposing papers to stand as the summons and notice of intention to defend respectively and affording the first respondent an opportunity to file a declaration within the 4 ordinary time period permitted in terms of the rules. His reasons for so doing appear to have been the existence of factual disputes in relation to the first respondent’s locus standi, the alleged claim and the question of whether the joint estate of the applicant and her husband was indeed insolvent. There was also a question raised about the joinder of D & F Chemicals CC. 5. On 3 October 2003 the first respondent filed its declaration. In terms thereof it sought judgement against the applicant and her husband jointly and severally for payment of the amount of R8 934 975,95 together with interest a tempore morae, and an order provisionally sequestrating the joint estate of the applicant and her husband. Neither the applicant nor her husband filed a plea in the time period prescribed by the rules. Accordingly, on 12 December 2003 the first respondent’s attorneys served a notice of bar upon Werner Prinsloo Attorneys (“Prinsloo”) who had been instructed by the applicant’s husband in the sequestration proceedings. 6. On the same day, 12 December 2003, unbeknown to the first respondent or its attorneys and without the judge granting the order being informed of the insolvency proceedings, this court issued a decree of divorce dissolving the bonds of marriage between the applicant and her husband. 5 7. In the period between the filing of the declaration and the divorce it is evident that attempts were made, though it would seem not too conscientiously, to find a settlement to the dispute. On 3 November 2003, Prinsloo addressed a letter to the first respondent’s attorneys which read: “Ons verwys na u faks van 31 laaslede en het wel die moontlikheid van ‘n skikking met kliënt bespreek. Kliënt is egter op hierdie oomblik nie in ‘n posisie om ‘n skikkingsvoorstel te maak nie, maar sou die posisie verander sal ons u onmiddellik in kennis stel. Ten opsigte van u deklerasie het ons dit aan Advokaat oorhandig en is ons tans besig met die voorbereiding van ons pleit. Dit behoort eersdaags op u beteken te word.” 8. As the plea was not filed this obviously led to the notice of bar on 12 December 2003. Despite this, Prinsloo addressed another letter to the first respondent’s attorneys on 9 February 2004 which read: “Ons verwys na die telefoongesprek tussen skrywer en u mnr Scheepers op 4 deser asook u daaropvolgende skrywe. Na aanleiding van die gesprek bevestig ons dat ons verweerskrif reeds beteken moes word na aanleiding van u kennisgewing van belet. Soos egter aan u verduidelik is ons kliënt se toekoms en veral die Beslote Korporasie se toekoms 6 tans in die weegskaal en wil ons nie nou onnodige verdere regskoste aan die voorbereiding van ‘n verweerskrif spandeer nie. Ons kliënt besit nie oor die fondse wat u kliënt van mening is hy moet hê nie en raap en skraap hy werklik om maandeliks sy uitgawes te vereffen. Onder die omstandighede versoek ons u vriendelik om die liassering van ons verweerskrif oor te hou tot uitdruklike instruksies van u kliënt veral gesien in die lig van u kliënt se eie beoogde oorname. Onder die omstandighede wil ons, sonder dat ons instruksies daartoe ontvang het, aan die hand doen dat die aksie geskik word op die basis dat u kliënt sy eis terugtrek en elke party sy eie koste betaal. Ons verneem eersdaags van u.” 9. The first respondent’s attorneys replied to this letter the next day, 10 February 2004, as follows: th “Thank you for your facsimile of the 9 instant. We will refer same to client for instructions but must point out that we do not think our client will be agreeable to settle the matter on the basis that plaintiff withdraws its claim and each party pays its own costs. We will however revert upon receipt of instructions.” 10. The applicant claims that this correspondence reflected an oral agreement or understanding that the action would be held over until the first respondent gave further instructions to proceed. The first respondent 7 denies this and annexed to its answering affidavit a letter addressed by its attorneys to Prinsloo dated 4 February 2004 which read: “Telecon between writer and yourself on even date refers. We confirm that we th will hold the matter in abeyance until Wednesday 11 February 2004 pending your written requests for an indulgement which of course will have to be referred to client for further instructions. Trusting you find the above in order.” 11. On 1 April 2004 the first respondent’s attorneys served an application for default judgement on Prinsloo setting the application down for 6 April 2004. This prompted telephonic discussions between the attorneys in terms of which it was agreed to remove the application from the roll for 6 April 2004 and to reinstate it on 13 April 2004. 12. In a letter dated 7 April 2004 addressed to the first respondent’s attorneys in Pietermaritzburg, which the fax transmission slip reveals only reached them on 13 April 2004 at 10h42, Prinsloo stated as follows: “Ons verwys na u skrywe van 10 Februarie 2004 asook die voorafgaande telefoniese gesprekke tussen skrywer en u mnr Scheepers. Tydens die telefoongesprekke en in die skriftelike dokumentasie wat daarop volg, het ons met u mnr Scheepers ooreengekom dat die liassering van ons verweerskrif oorgehou word hangende verdere instruksies van u kliënt en dat u 8 ons vroegtydig skriftelik in kennis sal stel indien u kliënt vereis dat die aangeleentheid moet voortgaan en ons verweerskrif geliasseer moet word. Tot op datum het ons nie van u verneem dat die verweerskrif verlang word nie en het ons aanvaar dat u kliënt die voortsetting van die aksie steeds oorweeg. Ons kliënt is geensins bereid om in te stem dat verstekvonnis teen hom geneem word nie en is steeds van voorneme om die aksie te verdedig. Bloot uit ‘n koste oogpunt was skrywer en u mnr Scheepers dit eens dat die voortsetting van hierdie aksie moontlik nie in ons onderskeie kliënte se belang is nie en slegs onnodige regskostes tot gevolg mag hë. Intussen het ons ‘n aansoek om verstekvonnis van u plaaslike korrespondente ontvang waarin die aangeleentheid geplaas word vir aanhoring op Dinsdag 13 April 2004. Ons is van mening dat hierdie optrede instryd is met die bestaande ooreenkoms en versoek u vriendelik om die aansoek om verstekvonnis van die rol te verwyder. Ons verneem dat mnr Scheepers nie meer by u werksaam is nie en dat die aangeleentheid nou deur u mnr Liebetrau hanteer word. Skrywer het reeds twee telefoniese boodskappe by u kantoor gelaat en sal graag die voortsetting van hierdie aangeleentheid met u mnr Liebetrau wil bespreek voordat verdere pleitstukke verwissel word. Ons verneem dringend van u.” 9 13. On the same morning, one assumes around about the same time as the fax reached Pietermaritzburg, here in Pretoria, van der Merwe J handed down an order in the following terms: “Na aanhoor van die advokaat namens die eiser, word die volgende bevel by verstek teen die verweerders verleen ten gunste van die eiser: A. Teen die eerste verweerder: 1 ‘n Bevel ingevolge waarvan verklaar word dat die eerste verweerder persoonlik teenoor die eiser aanspreeklik is vir: 1.1 Betaling van die bedrag van R8 934 975,95, 1.2 Rente op die bedrag van R8 934 975,95 teen die wetlike voorgeskrewe koers a tempore morae vanaf die datums waarop elke chemikaliese produk, vier ‘slashers” en kunsmis deur die eiser aan die vennootskap bekend as D&F Chemicals, alternatiewelik aan D&F Chemicals BK (Registrasienommer: CK 99/45027/23) gelewer is maar nie betaal is nie, tot datum van betaling. B. Teen die eerste en tweede verweerders gesamentlik en afsonderlik, die een betalende die ander kwytgeskeld te word 1 Betaling van die bedrag van R8 934, 95 2 Rente op die bedrag van R8 934 975, 95 teen die wetlik voorgeskrewe koers a tempore morae vanaf die datums waarop elke chemikaliese produk, vier “slashers” en kunsmis deur die eiser aan die vennootskap bekend as 10 D&F Chemicals, alternatiewelik aan D&F Chemicals BK (Registrasienommer: CK 99/45027/23) gelewer is maar nie betaal is nie, tot datum van betaling; 3 Koste van die geding op die basis soos tussen prokureur-en-eie-kliënt. C. Teen die eerste en tweede verweerders: 1 Die gesamentlike boedel van die verweerders, te wete Coenraad Frederick Els en Tertia Matilda Els, word hiermee onder voorlopige sekwestrasie geplaas in die hande van die meester van die hof en ‘n bevel nisi word uitgereik wat die verweerders oproep om redes, indien enige, voor hierdie hof aan te voer om 10:00 op 18 Mei 2004 waarom: 1.1 ’n finale bevel van sekwestrasie nie teen hulle boedel gemaak moet word nie; 1.2 koste van die aansoek om sekwestrasie nie koste in die sekwestrasie moet wees nie. 2 Die bevel in paragraaf C1 moet onverwyld in die Staatskoerant en Beeld gepubliseer word; 3 Kennisgewing van die bevel in paragraaf C1 moet aan alle bekende skuldeisers en die Ontvanger van Inkomste per aangetekende pos geskied.” 14. For reasons unknown, Prinsloo appears not to have instructed counsel to appear in the default judgement proceedings or to have arranged for the 11 letter dated 7 April 2004 to be handed into court. On 20 April 2004 the first respondent’s attorneys addressed a letter to Prinsloo setting out their client’s position regarding the alleged agreement not to proceed. It reads: Die vorige korrespondensie wat tussen ons onderskeie kantore gevoer was spreek vir sigself. U het ‘n vergunning gevra vir liassering van die verweerskrif en voorgestel dat die aksie geskik word op die basis dat ons kliënt se eis teruggetrek word en elke party eie kose betaal. Hierop atwoord ons dat ons, ons kliënt se instruksies sal neem maar nie glo dat ons kliënt tevinde sal wees vir skikking soos voorgestel nie. Dit is tog duidelik dat daar geen vergunning verleen was vir liassering van u kliënt se verweerskrif nie. U het daarna kennis ontvang dat daar voortgegaan word met verstek vonnis. U bewering dat dit in stryd is met ‘n bestaande ooreenkoms word verwerp. U brief is gedateer 7 April 2004 maar was eers per faks aan ons versend op 13 April 2004.” 15. In its answering affidavit the first respondent thus contends that Prinsloo was already aware on 1 April 2004 that the first respondent intended to seek default judgement, yet he failed to put in an appearance of any kind on 13 April 2004. 16. Prinsloo replied to the letter of 20 April 2004 in a letter dated 22 April 2004: 12 “Ons verwys na u faks van 20 deser en verskil drasties met u interpretasie van die dokumentasie. Ons verneem dat u ten spyte van die koligiale ooreenkomste tog voortgegaan het om verstek vonnis en ‘n voorlopige bevel te neem ten spyte van ons skrywes en telefoniese boodskappe aan u mnr Liebetrau gelaat. Onder die omstandighede versoek ons u om afstand te doen van die bevel verkry en toe te stem tot die tersydestelling van die voorlopige sekwestrasie en ons geleentheid te bide om die Verweerder se verweerskrif te liasseer. Indien u nie tot voormelde toestem nie, het ons instruksies om steeds ‘n formele aansoek tot tersydestelling te loods en ook ‘n gepaste kostebevel onder die omstandighede aan te vra. Ons verneem dringend van u.” 17. The correspondence concluded with a letter addressed by the first respondent’s attorneys to Prinsloo dated 29 April 2004 in the following terms: “U telefaks van 22 April 2004 verwys. Na watter skrywes verwys u. U het een brief vir aandag van skrywer aan ons gestuur synde u brief van 7 April 2004 welke op 13 April 2004 om 10h42 per faks aan ons versend was. 13 Skrywer het geen telefoniese boodskappe van u ontvang nie. Ons is nie bereid om afstand te doen van die bevel nie.” 18. It is common cause that the default judgement handed down on 13 April 2004 was served on Prinsloo on 26 April 2004, more than two weeks before the return date reflected in the order of provisional sequestration. Nevertheless, there was no appearance on behalf of the applicant or her husband on the return day and accordingly a final order of sequestration was issued by Botha J on 18 May 2004. 19. Five months later on 22 October 2004, the applicant filed a notice of motion seeking to set aside the default judgement debt as well as the provisional and final orders of sequestration. She further seeks condonation for the late filing of the rescission application insofar as that is necessary. As I have said, the first respondent opposes the application as does the intervening creditor, the fifth respondent. 20. As appears from what has gone before, there are three default judgements against the applicant. The application for rescission of the judgement debt in the amount of R8 934 975,95 must be brought in terms of rule 42, rule 31(2)(b) or in terms of the common law. Rule 42 allows a court to rescind judgements erroneously sought or erroneously granted in the absence of any party affected thereby, or containing ambiguities, 14 patent errors or omissions, and those granted as a result of a mistake common to the parties. No application has been made in this instance in terms of rule 42. Rather, it would seem (it is not stated), the application before me is in terms of rule 31(2)(b) which provides that the defendant in whose absence a judgement was granted may within 20 days after acquiring knowledge of such judgement apply to court upon notice to the plaintiff to set aside the judgement and the court may upon good cause shown, and upon the defendant furnishing to the plaintiff security for costs, set aside the default judgement on such terms as to it seems meet. The requirement of “good cause” in rule 31(2)(b) mirrors the requirement of “sufficient cause” at common law. This means that the defendant (the applicant) must give a reasonable explanation of his default, usually requiring that the default not be wilful or reckless; that the application must be bona fide and not made with the sole intention of delaying the plaintiff’s claim; and the defendant must show that he or she has a bona fide defence to the claim. As is well known, the court has a wide discretion in evaluating good cause in order to ensure that justice is done between the parties.A good defence can compensate for a poor explanation and vice versa. 21. With regard to the applications for rescission of the provisional and final orders of sequestration a different standard applies. In terms of section 149(2) of the Insolvency Act 24 of 1936, the court may rescind or vary any 15 order made by it under the provisions of the Act. Notwithstanding the fact that the section confers a wide power, it is well established that there must be some unusual, special or exceptional circumstances in order to justify relief under section 149(2). In Abdurahman v Estate Abdurahman 1959(1) SA 872 (C) at 873, De Villiers AJ stated : “For all these reasons it seems clear that in order to justify the exercise of a discretion under section 149(2) the applicant or plaintiff seeking relief from insolvency should satisfy the court that his being confined to the normal forms of procedure available to him would for some reason be inequitable and not desirable - regard being had to his own position, to that of his creditors and to the considerations of public interest…” 22. Thus, it should be kept in mind, an applicant seeking relief from insolvency can oppose final relief where an order has been granted provisionally, can appeal against the final order and can seek rehabilitation. On the other hand, there is no stipulated time period within which an application in terms of section 149(2) must be made. 23. Turning first to the application to rescind the order granting judgement for the amount of R8 934 975, 95. In terms of rule 31(2)(b) the applicant was required to make application within 20 days of acquiring knowledge of the judgement, failing which she requires an order in terms of rule 27(1) extending the time period or in terms of rule 27(3) granting her 16 condonation for non-compliance. Here too she is obliged to show good cause for not making the rescission application timeously or in accordance with the rules. In her founding affidavit the applicant makes out a case for condonation or extension of the time period. She claims only to have become aware of the judgement on 21 May 2004 when the sheriff arrived at her home to draw up an inventory of her property in pursuance of the judgement. She states that she then contacted her former husband who advised her that he had instructed Prinsloo to proceed with a rescission application. When she heard nothing further, she claims to have begun to make enquiries about what had transpired. She does not state precisely when she began to embark upon these enquiries. Her efforts at this point, so she maintains, were thwarted firstly by the refusal of Prinsloo to disclose the contents of the files to her because of a dispute with her former husband about the non-payment of fees, and secondly because she was not in a financial position to put her current attorney of record in funds to proceed with the application, in view of the fact that she had recently divorced and had commenced a new career as an estate agent, having prior to that being a stay at home mother and housewife. She obtained the content of the file from Prinsloo eventually on 16 August 2004. Thereafter, she sought to obtain the judgement of Bertelsmann J, which she acquired on 16 December 2004. The five or six weeks thereafter were allegedly taken up with drafting papers and acquiring the 17 declaration. Much of the problem, she states, was the result of Prinsloo having been instructed by her former husband and not by her. 24. I have reservations about the truthfulness of the applicant’s version. It is common cause that the order containing the three default judgements was served upon Prinsloo on 26 April 2004. Its strikes me as highly improbable that neither Prinsloo, nor the applicant’s husband, would have communicated to the applicant that a judgement in the amount of almost R9 million, and a provisional sequestration order had been granted against her, especially when Prinsloo needed to determine whether the sequestration order ought to be opposed on the return day. My view is fortified by Prinsloo’s letter of 22 April 2004 to the first respondent’s attorneys that he had instructions to proceed with a rescission application. The improbability of the claim that Prinsloo was acting only on behalf of the applicant’s husband is confirmed furthermore by the contents of a letter addressed by the applicant’s current attorneys of record to Prinsloo dated 11 August 2004 in which it was recorded that Prinsloo was acting on behalf of the applicant in two matters, one presumably the divorce proceedings and the other the insolvency proceedings. The relevant part of this letter reads: “Ons bevestig dat ons instruksies van ons kliënt, Mev Els, ontvang het ten einde hierdie aangeleentheid verder namens haar te voer. Ons het tans reeds ‘n konsultasie met haar belê op Vrydag, 13 Augustus 2004 om 15:00. 18 Ons plaas verder op rekord dat u aangedui het dat u tans twee lêers namens Mev Els hou. U is bereid om die leer ten opsigte van die Aansoek om Tersydestelling aan ons beskikbaar te stel, tesame met die relevante inligting daartoe.” (my ephasis) 25. In addition other evidence (discussed more fully below) shows that the applicant and her former husband, despite having divorced, remained in contact with each other and that he sometimes left some of his possessions at the applicant’s home. He also, according to the applicant, visited the former marital home regularly to see his daughter. Taking into account evidence showing that the applicant’s husband frequently used her bank account for business purposes, it seems highly likely that he would have kept her abreast of his legal, financial and business affairs to the extent that they affected her directly. 26. But even were I to accept that the applicant acquired knowledge of the judgement only on 21 May 2004, as she claims, she nonetheless still delayed another five months. Moreover, in correspondence addressed by her attorneys of record to the second respondent dated 25 August 2004 there are indications that the applicant had acquiesced in the sequestration orders, and hence the judgement debt. This letter reads: “We refer to the above matter. 19 We wish to confirm that Mrs Els has approached us in order to act on her behalf. th She has also handed to us your letter dated the 17 of August 2004. It is our instructions that it was never our client’s intention in order not to provide a statement of affairs. It is to our knowledge that our client has ended the mandate of her previous attorney Werner Prinsloo Attorneys. According to our client Mr Prinsloo dealt with all the relevant matters necessary. Our client is at this stage not sure whether she has already provided Mr Prinsloo with her statement of affairs. If you have a specific form that has to be completed by our client, our client indicates that she will complete same. In the absence of the aforementioned you are requested to provide us with an indication as to what information you request from our client.” 27. No reference is made to any instructions to apply for rescission of the sequestration order or the judgement debt in this letter. 28. The applicant’s claim to have been without funds is equally doubtful. Her bank account statements for the period April to May 2004 reflect varying balances between R11400 and R31400. Moreover, any difficulty she might have had in obtaining information from Prinsloo could have been explained in a supporting affidavit and appropriate relief sought from the court. 29. Accordingly, I am not persuaded that the applicant has made out a proper case, or has shown good cause, in terms of rule 27(1) or rule 27(3) 20 entitling her either to an extension of the time period in rule 31(2)(b) or for condonation. It would follow therefore that the judgement in the amount of R8 934 975,95 against the applicant should stand and in the light of her own evidence about her financial circumstances she would be factually insolvent and hence no purpose would be served in rescinding the sequestration orders. 30. Nevertheless, for the sake of completeness, and in the interests of justice, I am prepared to consider whether the applicant has met the requirements for rescission in terms of the common law and/or section 149(2) of the Insolvency Act. 31. In order to show good cause the applicant should give a reasonable explanation for her default. It is permissible to have regard not only to the reasons for the failure to file a plea but also to the applicant’s dilatory approach subsequent to judgement, aspects of which I have already canvassed when discussing condonation. 32. The applicant’s explanations for failing to file a plea or to oppose the application for default judgement are unconvincing. She claims, in effect, that an oral agreement was entered into between the first respondent’s attorneys and Prinsloo that the matter would be held over until the first respondent gave express instructions to proceed with the matter, in which case Prinsloo would be notified to file a plea. This submission simply does 21 not square with the correspondence. The respondent’s attorneys had already served a notice of bar some months before. At best for the applicant, the respondent merely indicated that it would seek further instructions. Even then, it made it plain that it did not think the settlement proposals would be acceptable. Besides that, once the application for default judgement was served upon Prinsloo it was abundantly clear that the first respondent intended to proceed to obtain judgement. Prinsloo was apprised of the fact that the matter had initially been set down for default judgement on 6 April 2004 and participated in the discussions leading to the matter being postponed until 13 April 2004. Despite that, neither he, nor the applicant or her husband made any appearance. They had no reason to assume that the application for default judgement would not be proceeded with. Added to that, as I have already indicated, it was common cause that the provisional order of sequestration was served upon Prinsloo on 26 April 2004, three weeks before the return date. Such notwithstanding, neither the applicant, her husband, nor Prinsloo put in any appearance on the return date. No persuasive explanation has been offered for their failure to do so. The applicant, we have seen, claims to have become aware of the order only on 21 May 2004. This, as I have said, is unconvincing and highly improbable. Any neglect by Prinsloo to communicate to the applicant the fact of her provisional sequestration would be a serious breach of duty. The applicant’s failure to allege as much in her founding papers is a further indication that such probably did 22 not in fact occur. In any event, it is common cause that Prinsloo knew of the application for default judgement, the default judgement and the provisional sequestration. This knowledge should be imputed to the applicant, especially when the evidence overall confirms that he was acting on her behalf in the divorce and insolvency proceedings. Prinsloo’s neglect to file a plea, his failure to make an appearance or to put information before the court in the default judgement application and his failure to make an appearance on the return date are all instances of wilful or reckless default. In the premises, and in view of the lackadaisical approach taken after judgement was given, I am compelled to the conclusion that no reasonable explanation has been offered for the applicant’s default. 33. Much time and effort were spent in argument on the question of whether the application for rescission was bona fide and not made with the sole intention of delaying the first respondent’s claims. The first respondent placed emphasis on the timing and the manner of the divorce between the applicant and her husband, as well as certain financial transactions reflected in the applicant’s bank statements, to advance the proposition that the divorce was a sham deployed in the hope of the applicant being placed thereby in a position to avoid or mitigate the consequences of a declaration of insolvency. It argued that the manner in which the divorce was concluded reveals either an attempt at concealment 23 or a deliberate strategy of illegitimate avoidance, even if ham-handed and unlikely to yield the desired result. 34. As I have mentioned, the divorce was granted on the same day as the notice of bar after the failure to file a plea to the declaration. As such, the timing certainly raises a suspicion that it may have been a divorce of convenience. In her founding affidavit the applicant positively avers that the joint estate had been divided as a result of the divorce on 12 December 2003, that the basis of any liability on her part in terms of the declaration filed on 3 October 2003 therefore no longer applied, and hence that the provisional sequestration of the joint estate on 13 April 2004 was not competent because at that date the joint estate no longer existed. 35. The divorce summons was issued on 7 November 2003, about a month after the filing of the declaration. The summons reflects the applicant’s attorney to be MC van den Berg Attorneys of Centurion, whereas the court file and divorce order reflect the pigeon-hole number allocated by the Registrar to Werner Prinsloo Attorneys. After making enquiries about this apparent anomaly, the first respondent received a letter from MC van den Berg dated 15 November 2004 in which he explained: “INSOLVENTE BOEDEL C F & T M ELS 24 U skrywe gedateer 5 November 2004 verwys. Ons het instruksie ontvang vanaf mnre Werner Prinsloo Prokureurs om namens hulle as korrespondente in hierdie aangeleentheid op te tree. Kort nadat dagvaardiging uitgereik is, het laasgenoemde prokureurs die aangeleentheid weer terug geneem. Betaling het nooit aan ons plaasgevind nie, maar wel aan mnre Werner Prinsloo Prokureurs.” 36. It is indeed unusual for a Pretoria attorney to appoint another Pretoria based attorney as a correspondent. The applicant and Prinsloo explained that van den Berg’s services were used because Prinsloo thought it undesirable to act on behalf of both the applicant and her husband. Despite the terms of the divorce and settlement agreement having been agreed between the parties, Prinsloo considered it prudent to bring in van den Berg. Nevertheless, he drafted the particulars of claim and personally took them to van den Berg who signed them. After signing the particulars van den Berg then convinced Prinsloo that it would not be unethical for him to act on behalf of both the applicant and her husband. With that, Prinsloo took his file back and finalised the divorce proceedings. The difficulty one has in accepting such an explanation arises from van den Berg’s initial description of his role as that of correspondent and the fact that Prinsloo did not reinstate himself as attorney of record by himself signing the particulars of claim before issuing them. Having consciously accepted van den Berg’s advice that it was ethical to act as the applicant’s attorney of record, he nevertheless went ahead and immediately issued 25 the summons signed by van den Berg. As for van den Berg’s use of the term “correspondent”, Prinsloo stated that he never intended to instruct van den Berg as a correspondent, while both the applicant and van den Berg attempt to explain away the usage of the term “correspondent” as “n swak woord keuse”. 37. The first respondent submits that this unusual chain of events, and the improbable explanation for them, point rather to an attempt to create the impression of an arms-length divorce with a view to suppressing any suspicion of collusion. As will become evident presently, other facts tend to support this interpretation. 38. The applicant maintains that the true reason for the divorce was her husband’s infidelity. She avers that at about the same time as the launch of the sequestration proceedings she became aware of her husband’s extra marital affair with another woman, who she fails to identify. She then consulted with another attorney, Mr van Strijp of Ermelo in that regard. Van Strijp has filed a supporting affidavit confirming the applicant’s instructions to him that the reason advanced for the divorce was in fact her husband’s infidelity. I would have been inclined to accept her version more readily on this delicate question were it not for the fact that the particulars of claim in the divorce action make no mention of the adultery as a contributing cause to the breakdown of the marriage. It was 26 incumbent on the applicant in the divorce proceedings to make a frank and full disclosure to the court of the true reasons for the divorce. Her failure to do so must redound negatively on her credibility. 39. Moreover, the settlement agreement made an order of court in the divorce proceedings misrepresents the true factual and legal position with regard to the parties’ immovable property. Clause 3 of the settlement agreement reads: “VERDELING VAN BATES 3.1 Onroerende eiendom 3.1.1 Die eiendom geleë te Fouriestraat 80, Ermelo, word aan die eiser toegeken as haar uitsluilike eiendom; 3.1.2 Eiseres aanvaar verantwoordelikheid vir die huidige uitstaande verband; 3.1.3 Eiseres sal toesien dat die nodige registrasie van die verweerder se onverdeelde halwe aandeel op eiseres se naam geskied; 3.1.4 Die eiendom bekend as Bihrmanstraat 1a, Ermelo, sal so spoedig moontlik deur die partye verkoop word en die netto-opbrengs daarvan sal aan die verweerder toegeken word as sy uitsluitlike eiendom. 3.2 Roerende bates Die roerende bates is reeds onderling tussen die partye verdeel en elke party behou die bates tans in sy of haar besit as sy of haar uitsluitlike eiendom” 27 40. The first respondent in its answering affidavit drew attention to the fact that clause 3.1.4 of the settlement agreement was inaccurate in that a sale agreement in respect of the property mentioned in that clause had already been concluded on 23 October 2003, almost two months before the divorce was granted and that the proceeds of the sale were not in fact paid to the applicant’s husband but instead to Mrs Theresa Potgieter, the wife of one of his acquaintances. The first respondent acquired this knowledge from testimony given by the applicant’s husband during an insolvency enquiry conducted in terms of the Insolvency Act, where he testified that the property had been transferred into his name because Potgieter at the time of purchase had been an unrehabilitated insolvent. Potgieter paid the deposit and monthly bond repayments. The applicant confirms this to be the true situation with regard to the property in question. Her explanation for the untrue account of it in the settlement agreement offers some insight into her less than ethical nature. In paragraph 11.1 of her replying affidavit she states: “11.1 Die skikkingsooreenkoms deel met die vaste eiendomme wat in die gemeenskaplike boedel was op datum van skikking, synde die Birmanstraat- eiendom en die Fouriestraat-eiendom. Die rede waarom klousule 3 met die Birmanstraat-eiendom deel soos daarin vervat, is dat iets oor die betrokke eiendom in die skikkingsakte gesë moet word en die eiendom uit die gemeenskaplike boedel getransporteer moet word. Dit was te alle relevante tye gemeensaak tussen myself en my gewese eggenote dat die betrokke eiendom nie aan die gemeenskaplike boedel behoort nie, 28 maar die eindom is van die Potgieter-gesin. Ons het toe besluit om te notuleer dat die eiendom so spoedig moontlik verkoop word, aangesien daar ‘n koopooreenkoms gesluit was gedurende Oktober en is dit genotuleer dat die opbrengs na my gewese eggenoot sou gaan. Dit was deurgaans ook die bedoeling dat hierdie gelde aan Mev. Potgieter oorbetaal sou word. ‘n Verdere rede was dat die verband oor die betrokke eiendom nie deur my gedelg wou kon word nie en dat my gewese eggenoot die verantwoordelikheid daarvoor sou neem en dan vir dieselfde rede ook die eiendom in sy naam moes registreer totdat dit eendag verkoop kon word en die opbrengs aan Potgieter betaal sou word. Ek moes die Fouriestraat- eiendom oorneem, asook die verband daarop. Die doel daarvan was ook dat ek behuising kon kry en moontlik huurinkomste uit die verhuring van kamers van die Fouriestraat-eiendom. Dit sou my ook behulpsaam wees met die betaling van die verband oor die betrokke eiendom.” 41. She goes on to deny that there was any intention to create an impression that the divorce was at arms-length by reflecting an apparent equal division of the assets. What evidently escapes her, and which surely must count against the credibility and reliability of her version, is that she and her husband gave a false account of their assets to this court during the divorce proceedings. The explanation put forward in her replying affidavit amounts to an admission, without any evident sign of regret, that she and her husband misled the court by failing to disclose fully the true state of their affairs. 42. During May 2004, some six months after the divorce, Mr Eugene Nel, an attorney in the employ of the first respondent’s attorneys visited the 29 applicant at her home in Ermelo in order to draw up an inventory of assets. Together with the Deputy-Sheriff he came upon a room in the applicant’s house which appeared to be used as an office in which he found documents relating to the husband’s business dealings, his briefcase containing his passport and chequebook, as well as personal records of the applicant. The applicant in reply has countered that the room is nothing more than a study used by her and her minor daughter. She explained that the briefcase and documents belonging to her husband had been left by him after he had visited his minor daughter before leaving for Durban on a golfing trip. She disputes therefore the inference sought to be drawn by the first respondent that despite the divorce the applicant and her husband continue to live and conduct business together. 43. Although the applicant fails to deny all of Nel’s allegations, including the allegation that the computer contained records of the husband’s business or that the servants informed Nel that neither the applicant nor her husband were at home, this evidence, besides in some respects being hearsay, raises a dispute of fact that cannot be resolved on the papers. However, the resolution of the dispute of fact is not necessary for the determination of the application and the evidence ought accordingly to be left out of reckoning. 30 44. A review of the transactions recorded in a number of the applicant’s bank statements support the conclusion that the applicant has been less than forthright under oath about the nature and purpose of her financial dealings. In paragraphs 11 and 12 of her founding affidavit the applicant states that she at no stage participated in the activities of her husband’s business, as conducted through D&F Chemicals CC, and that she had never been gainfully employed for the duration of her marriage. The first respondent maintains that her bank accounts tell a different story. It has produced some of the applicant’s current account bank statements for the period June 2002 - May 2004. From them it is clear that substantial deposits and withdrawals were made, suggesting that the account was used for purposes other than running the household. 45. The applicant has provided an account of certain of the transactions, amounting in some instances to a concession in effect that the account was used for business purposes. Her explanation for a deposit of R160 000 in November 2002 was that her husband needed to purchase raw materials for fertiliser and that the money was transferred from their bond account to her account for that purpose. It is not clear why the transfer was not made directly to her husband’s account or to that of D&F Chemicals CC. Other transactions requiring clarification have not been explained. Thus, there is no account of a cash deposit of R62 000 effected 31 on 14 February 2004, shortly after the divorce. Likewise, she tenders no explanation for a cash deposit of R10 450 on 9 March 2004. 46. The bank statements thus point to two legitimate conclusions. Firstly, the applicant’s bank account, on her own admission, was used to conduct part of the business of her husband and D&F Chemicals CC. Secondly, substantial cash deposits were made into her account subsequent to the divorce, giving the lie to her claim that she was not involved in her husband’s dealings and that she was financially strapped. Her failure to play open cards supports the first respondent’s allegation that she is not bona fide. 47. The applicant’s propensity for mis-statement is further borne out in her accounting for the maintenance paid to her by her husband. In terms of the divorce settlement the applicant is entitled to maintenance in the monthly amount of R18 000. In paragraph 11 of her founding affidavit she declares that in the relevant period her husband had only paid her R10 000 per month and such was insufficient for her needs. In her replying affidavit she stands by the assertion, qualifying it slightly with a claim that approximately R10 000 per month was paid. Yet this is contradicted by the schedules annexed to her replying affidavit explaining various transactions in her bank account. In November 2003 she received R17 000 maintenance, as well as an additional R5000 as a contribution to joint household expenses. In December 2003 she received R18 000 together 32 with an additional R6 500 contribution to the costs of the divorce and relocation to another home. In January, February, April and May 2004 she received R17 000. These payments thus do not accord with her averment in the founding affidavit to the effect that she received R10 000 per month. This too casts a shadow over her credibility and good faith. 48. In the light of the foregoing, I am of the view that the application for rescission has not been made bona fide. The manner in which the divorce action was conducted, the failure to inform the divorce court of the pending sequestration proceedings, the role played by Prinsloo, the non- disclosure of the true reasons for the alleged breakdown of the marriage in the particulars of claim, the inaccurate accounting for the immovable property in the settlement agreement, the mis-statements, and the unsatisfactory or incomplete accounting for the transactions reflected in the applicant’s bank accounts, individually and cumulatively, point to an absence of bona fides and an intention to delay the first respondent’s claims. 49. Moreover, the surrounding circumstances indicate that the decision to bring the rescission application may only have eventuated in response to the applicant being subpoenaed to appear before an insolvency enquiry. As discussed above, correspondence from the applicant’s attorneys in August 2004 suggested that the applicant had acquiesced in the 33 judgements. When subpoenaed to appear before the insolvency enquiry the applicant sought and obtained a postponement in order to secure legal representation. The postponement was granted and the inquiry was rescheduled for 27 October 2004. Five days before she was due to appear, on 22 October 2004, the applicant filed this application. Her conduct in this respect, detracts not only from the reasonableness of the explanation for her default, but also undermines any assertion of bona fides. 50. As for the existence or otherwise of a bona fide defence, the applicant need only establish this prima facie. It is sufficient to set out facts which, if established at the trial, would constitute a good defence. She need not deal fully with the merits. On this point, therefore, I tend to agree with counsel for the applicant that the referral of the dispute to trial by Bertelsmann J of itself establishes prima facie the existence of a bona fide defence. However, the applicant would have done better to have disclosed the defence more specifically in her founding affidavit by dealing with the allegations making up the cause of action in the declaration or by filing a draft plea, something she has singularly failed to do. In the result, it might legitimately be argued that she has furnished no clear or convincing basis for why she should not be held liable at least for half of the R9 million debt. 34 51. But even giving her the benefit of the doubt that the referral to trial is sufficient, the existence of a bona fide defence in and of itself is self- evidently not sufficient or good cause to grant rescission, especially in view of my findings regarding condonation, the absence of a reasonable explanation for her default and the lack of bona fides. Accordingly, I am not prepared to rescind the order declaring the applicant jointly and severally liable for the payment of the amount of R8 934 975, 95. 52. Likewise, I am not persuaded that exceptional circumstances exist justifying the rescission of the provisional and final sequestration orders. Counsel for the applicant submitted that the failure to serve the rule nisi upon the applicant personally, the existence of factual disputes justifying a referral to trial, the dissolution of the joint estate by divorce, and the inappropriateness of the ordinary remedies of appeal and rehabilitation are all exceptional circumstances justifying the rescission of the sequestration order under section 149(2) of the Insolvency Act. I do not agree for the reasons already dealt with in my discussion of the application for the rescission of the judgement debt. Firstly, I reject, on the probabilities, the submission that the applicant was unaware of the default judgement of 13 April 2004 until after the grant of the final order. Secondly, although the joint estate no longer existed at the time of the provisional sequestration order, both the applicant and her husband were cited separately as parties, with the consequent effect of the orders being 35 that both were individually sequestrated. Spouses who were married in community of property remain liable for debts incurred by a former spouse during the subsistence of the marriage - see generally BP Southern Africa (Pty)Ltd v Viljoen en ‘n Ander 2002 (5) SA 630 (O). The failure by the applicant or her attorney to disclose to the court during the divorce proceedings that insolvency proceedings were pending, as well as the failure to disclose the divorce to the first respondent’s attorney at the time that default judgement was obtained, cannot, in my opinion, constitute exceptional circumstances of which the applicant should now have the benefit. If anything, they serve merely to justify a variation of the order to effect a sequestration of her individual estate, something this court is entitled to do mero motu in terms of rule 42. 53. In view of my refusal to grant rescission, there is no need to determine the intervening creditor’s application for sequestration under case number 16876/05, which as a consequence of my decision will fall away. However, being compelled by the rescission application to launch the application for intervention and the sequestration application based on its claim against the applicant, I am persuaded that the intervening creditor is entitled to the costs of both applications. 55. In the premises, I make the following orders: 36 a). The application for rescission under case number 20905/03 is dismissed. b). The order of Botha J under case number 20905/03 dated 18 May 2004 is hereby varied in terms of 42 to read as follows: “Word Gelas: dat die onderskeie boedels van Conraad Frederik Els en Tersia Matilda Els hierby gesekwestreer word te behoewe van die skuldeiesers, soos versoek.” c.) The applicant is ordered to pay the costs of the application, such costs to include the costs of the applications of the intervening creditor under case number 16876/05, including the costs reserved in respect of all previous appearances. J MURPHY JUDGE OF THE HIGH COURT st Counsel for the applicant Adv S Guldenpfennig, Pretoria, counsel for 1 respondent, Adv MC th Erasmus, Pretoria and counsel for the 5 Respondent, Adv G Lotz, Pietermaritzburg. 37 st Attorney for the applicant RNB Attorneys, Pretoria, attorney for 1 Respondent, Van Zyl, Le Roux th & Hurter, Pretoria and attorney for the 5 Respondent, Geyser, Du Toit, Louw & Kitching, Pietermaritzburg.
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